Condo and HOA Collections…Choosing the Right Solution
Things have vastly improved since the real estate crisis of the last decade. Prices have gone up nationwide, banks are promptly foreclosing, and community associations are welcoming new good paying owners into their buildings. On the other hand, associations are still not out of the woods yet, because there is still a lot of money that remains uncollected from the times of the crisis. Millions if not Billions of dollars are still owed for delinquent maintenance fees, and the debts foreclosed unit owners left behind. The question is how can that money be recovered in a manner that the cost of the recovery does not exceed the recovery itself?
Who should community associations turn to for Condo & HOA collections? Should they continue to rely upon their community association attorneys to try and collect from delinquent owners? Are your attorneys prepared to recover money from the foreclosed owners who left a lot of money owing and is collectible? Has your community association attorney even recommended or suggested that money owed from foreclosed units can still be collected? Most likely they have not because they are not specialized in collections. Or should community boards bring these tasks to specialists whose only business is to recover delinquent maintenance fees and old debts that many associations considered “bad debt write-offs”? Would it not be great if you could have that money back to put into your reserve account? Would it be great to have resident delinquent owners get all paid up and stay current?
There are two types of debt we are talking about: One, money that is owed by unit owners who are still residents and are late or who have just stopped paying. Two, debt that was accrued due to a foreclosure where the resident has left but the debt still has not been settled.
The answer is obvious. Specialized collection agencies are out there and are willing to devote resources on a merit basis to collect community association debt. They don’t get paid until the debt and their fees are collected. There are two kinds of debt we are talking about: One, money that is owed by unit owners who are still residents and are late or who have just stopped paying. Two, debt that was accrued due to a foreclosure where the resident has left but the debt still has not been settled. Yes, this type of debt is collectible within a statute of limitations.
It is always preferable for Condo & HOA collections to be managed by a specialist collection agency.
All too often, community association boards are left in the dark regarding collections that they have placed into the hands of their community association attorneys. No community association should be without a general counsel, but they are not hard wired to do collections and often do not focus on recovery. It is always preferable for Condo & HOA collections to be managed by a specialist collection agency. The fact of the matter is that when you are paid on an hourly basis (as attorneys are) there is no incentive to recover more.
Just as community associations reply on specialized managers to oversee their facilities, so too should community associations be looking towards collection companies to manage their Condo & HOA delinquencies. To be sure, any collection company worth its salt must have access to legal facilities to do the legal work required, but there is so much more to collections that community association attorney’s do not do that make a big difference in effective results.
Some of these differences include outbound calls to debtors, an accessible inbound call center (debtors don’t leave messages), a resolute letter stream, reporting to credit bureaus, payment demands made to mortgage servicers, and dedicated customer support teams with professionals trained to work with debtors in distress. Your collection agency should also offer clear and accurate reporting for CAMs and board members, and payment plan management that is free and does not create an additional burden on the delinquent owner. It’s all too easy to send your delinquency issues to your community association attorney, but why not call in a collection specialist to your next board meeting and consider a new solution to a problem that will never go away but can be managed in a more cost effective and efficient manner? Every board member should ask the question: How much have we collected using our attorney and how much has it cost us? Run the numbers and consider the alternative.